The Best Medium Cap Stocks to Invest in Right Now

What makes medium cap stocks so exciting? If you've ever wondered where the real growth opportunities lie, look no further than medium cap stocks. These companies are not as small as to be highly volatile, nor are they as large and over-saturated as blue-chip companies. Instead, medium cap stocks offer that sweet spot for growth, balancing risk and reward perfectly. In this article, we’ll dive into some of the best medium cap stocks available today, and explore why they might be worth your attention.

Before we dive into individual companies, let's take a step back and understand what a "medium cap" company is. In the simplest terms, these are firms with a market capitalization between $2 billion and $10 billion. Companies within this range are typically well-established in their industries, have more room for growth than their larger counterparts, but aren't as risky as small-cap stocks. The following are some of the top medium cap stocks that are making waves in the market today.

1. Carlisle Companies (Ticker: CSL)

Carlisle Companies has become one of the most talked-about medium cap stocks. It operates primarily in the building materials sector and has grown steadily in recent years. What makes Carlisle interesting is its consistent growth trajectory coupled with a focus on diversification. From roofing systems to industrial products, Carlisle’s broad portfolio enables it to perform well, even when one industry slows down. Analysts predict continued expansion due to Carlisle’s strategic acquisitions and innovations in the building industry.

In 2023, Carlisle saw its revenue climb to over $6 billion, reflecting both organic growth and growth through acquisitions. For investors looking for a steady performer in the industrial sector, Carlisle remains a strong choice. It's not just about growth either; Carlisle's dividend yield also attracts income investors, with dividends steadily increasing over the years.

2. Horizon Therapeutics (Ticker: HZNP)

For those inclined toward biotechnology, Horizon Therapeutics is an exciting option. Horizon focuses on treatments for rare and rheumatic diseases, a niche yet profitable market segment. Horizon's crown jewel is Tepezza, a drug that targets thyroid eye disease, which has shown explosive growth in sales since its launch.

What differentiates Horizon from its competitors is its robust pipeline. Several of its drugs are in late-stage clinical trials, and any successful approval could lead to significant stock price growth. Horizon's impressive 2023 performance and potential future approvals make it a top candidate for those looking at biopharmaceuticals in the medium cap sector.

3. Garmin Ltd. (Ticker: GRMN)

Garmin might be best known for its GPS devices, but the company has diversified far beyond that. Today, Garmin develops everything from fitness wearables to advanced avionics. With a market cap of just under $20 billion, Garmin remains on the larger end of medium cap stocks, but it continues to display the growth potential seen in smaller companies.

Fitness technology has become a critical growth area for Garmin, especially with the increased demand for health tracking devices. Garmin’s revenue from wearables, outdoor and aviation segments has consistently increased, making it an attractive growth stock. The company is financially stable, with minimal debt and consistent profit margins, which makes it a safer medium cap investment in the tech space.

4. Marvell Technology (Ticker: MRVL)

If you’re a tech enthusiast, Marvell Technology might already be on your radar. The semiconductor industry has exploded over the past few years, and Marvell has positioned itself as a key player in the 5G, cloud computing, and automotive markets. While not as large as its industry peers like Nvidia, Marvell’s smaller size means it has room to grow, especially as demand for semiconductors remains high.

One of Marvell’s strengths lies in its acquisitions, such as the acquisition of Inphi Corporation, which expanded its footprint in the data center and cloud infrastructure space. The company's financial health is also impressive, with strong revenue growth year-over-year, making it a top medium cap stock for tech-focused investors.

5. Deckers Outdoor Corporation (Ticker: DECK)

Not all medium cap stocks are from the tech or healthcare sectors. Deckers Outdoor, the parent company behind the popular UGG and Teva brands, is an example of a retail stock that continues to outperform expectations. Despite the challenges posed by the pandemic, Deckers has adapted by expanding its e-commerce presence and focusing on direct-to-consumer sales.

UGG, once considered a seasonal winter brand, has managed to remain relevant year-round with new product lines, and Teva’s growth in the outdoor market has also contributed to Deckers' success. The company’s balance sheet is strong, with minimal debt and high cash reserves, allowing it to continue investing in its growth strategy.

Why Invest in Medium Cap Stocks?

Medium cap stocks can be particularly attractive for investors for several reasons:

• Growth Potential: Medium cap companies are often at a stage where they have proven business models but still have plenty of room for expansion.
• Diversification: These stocks can provide diversification to a portfolio that might be overly reliant on large-cap or small-cap stocks.
• Risk vs. Reward: While small-cap stocks offer the potential for explosive growth, they also come with higher risk. Medium caps strike a balance, offering growth potential with less volatility.
• Mergers and Acquisitions: Many medium cap companies are targets for acquisition by larger firms, leading to quick stock price increases when these deals are announced.

Factors to Consider When Investing in Medium Cap Stocks

When evaluating medium cap stocks, here are some factors that can help guide your investment decisions:

1. Revenue Growth: One of the most critical indicators of a company's future potential is its revenue growth. Look for companies that consistently grow their revenue year over year, particularly those that are expanding into new markets or product lines.

2. Industry Trends: It's essential to be aware of the broader industry trends. For instance, the shift to 5G technology is driving growth for companies like Marvell Technology, while the rise in e-commerce has benefited retail stocks like Deckers Outdoor.

3. Profitability: Not all growth is created equal. Some medium cap stocks may show revenue growth, but if they aren't profitable or are burning through cash, they might not be as attractive. Look for companies with sustainable growth, as indicated by their profit margins and balance sheets.

4. Valuation: While medium cap stocks often present good growth opportunities, it’s essential not to overpay. Use metrics like the price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and enterprise value (EV) to ensure you’re getting good value for your money.

5. Management Team: A company's leadership can make or break its success. Look for medium cap stocks led by experienced teams with a proven track record of navigating challenges and executing strategic visions.

Conclusion

Medium cap stocks provide a unique investment opportunity. They are large enough to offer stability but small enough to have significant growth potential. Companies like Carlisle, Horizon Therapeutics, and Garmin illustrate the variety of sectors where medium caps can thrive. By understanding the advantages of medium cap stocks and carefully selecting companies with strong fundamentals, investors can position themselves to benefit from both capital appreciation and steady income over time. Whether you’re interested in biotech, tech, or retail, there’s a medium cap stock that can fit your investment strategy.

If you haven't already, consider adding some of these medium cap stocks to your portfolio. While they may not have the massive brand recognition of large-cap stocks or the volatility of small caps, they offer a balanced and compelling option for investors looking for long-term growth with manageable risk.